nanoString’s lackluster IPO
One of the companies posted by a user in the Nanalyze forums in 2003 was Illlumina (NASDAQ:ILMN), a company involved in genetic analysis solutions. If you had invested $1000 in Illumina at the time of this user’s post, you would have $42,220 today.
While most people have heard the term nanotechnology, fewer people are familiar with microfluidics, an emerging technology that enables precise, automated manipulation of tiny volumes of fluid. One application of microfluidics is the immediate point-of-care diagnosis of diseases. Nanostring Technologies (NASDAQ:NSTG) is a new company in this space having only IPO’d less than one month ago.
Founded in 2003, the company was initially funded primarily by Clarus Funds, which owns 36 percent, Draper Fisher Jurvetson (DFJ) Funds, which owns 20 percent, and OVP Venture Partners, which owns 23 percent. The CEO, Brad Gray, owns 4.77 percent of the company. The company has 138 employees, of which 46 work in manufacturing, 33 in sales, marketing and business development, 35 in research and development. The board of directors includes 3 representatives from Clarus Funds, 1 from DFJ, and 1 from OVP.
The company’s products include the nCounter assay family and the Prosigna genomic tool. Prosigna is an assay that can help determine the risk of recurrence of breast cancer. Every year, 1.4 million patients are diagnosed with breast cancer worldwide. The company is seeking regulatory approval to sell this product in the US having recently started selling the product in Europe and Israel. The list price of one nCounter Analysis System is $235,000. Every installed nCounter system produces around $100,000 in consumables per year. Consumables account for over 50% of the company’s revenue:
Nanostring had their IPO on June 26th, 2013. . The IPO was somewhat of a disappointment with shares falling nearly 20% on their first day of trading. The IPO priced at $10 per share with today’s price at $9.44 giving the company a minuscule market cap of only 137 million dollars. There seems to be little investor interest in the stock given the low average daily trading volume of only 270,000 shares. The main usage of funds obtained from the IPO is to commercialize Prosigna after obtaining regulatory authorization in the US, including establishing a dedicated oncology sales force
Revenue growth is impressive, however the company has incurred and continues to incur significant losses.
It’s interesting to note the strong representation on the board from the primary VCs that originally funded the company. At some point they will want to realize a return on their investment and it doesn’t seem that time is now. The regulatory approval to sell Prosigna in the US should be the next key milestone for the company.
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